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A History of Palm, Part 3: Handspring, From Rival to Partner

Tom Hormby - 2016.07.20

The Treo revolutionized the PDA market. Earlier attempts at wireless PDAs failed to make an impression on the market – the Motorola Marco and the Qualcomm pdQ were notable examples. They were much larger than their non-wireless counterparts, were expensive, and had only limited wireless functionality.

The Handspring Treo flouted the Graffiti standard (one of the major selling points of the original Pilot) in favor of a “thumbboard” like those found on the RIM BlackBerry 605 and Motorola pagers, and it was priced to compete with other PDAs, not fusion devices like the Qualcomm pdQ that could cost upwards of $700. The Treo single-handedly rescued Handspring (and perhaps Palm) from insolvency and would become the most popular product line at a resurgent Palm, Inc.

But we’re getting ahead of ourselves.

Pilot Prehistory

Jeff Hawkins founded Palm Computing in 1992 with money from Tandy and Kleiner, Perkins, Caufield & Byers. Since Hawkins never fancied himself an executive or even a manager, his partners hired Donna Dubinsky (who had worked at Apple and Claris before Apple reneged on its promise to take the software company public) to be CEO, and a little later, Ed Colligan (from Radius, a Mac-peripherals company) to head up marketing.

The company helped develop software for the Tandy Zoomer, a PDA released jointly by Casio and Tandy to combat the Apple-Sharp juggernaut, the Newton. Zoomer was one of Apple’s first casualties. The two devices were about the same size, but because of its clunky and already dated GEOS operating system, Zoomer was slow and unstable. Palm’s PIM software was well regarded, but that didn’t mean much without a good platform.1

Palm poked along, selling PalmConnect, which was essentially HotSync for different PDA platforms, until one of Palm’s engineers, Ron Marianetti, came up with a brand new concept for the PDA market: Graffiti.

Ordinary handwriting was very difficult for computers to recognize, even if it was easy for users. If users compromised with the computer and wrote in a script that was easy for computers to recognize, accuracy would be improved, and users would have to do less correcting.

Marianetti wrote the Graffiti software with a predefined and simplified alphabet. Instead of writing words, users wrote individual letters on a free floating window. Graffiti was first marketed for other platforms, including Newton (where it was a best seller), but not for long.2

Hawkins had an epiphany, and he devised a brand new form factor for PDAs. Code named Touchdown (since it would save the company, which was bleeding money), the Pilot was small enough to be carried in pants pockets and featured the brand new Graffiti software, making data entry much easier and faster.3

Touchdown started as little more than a form factor and the Graffiti concept. Hawkins went to his garage and created a Pilot-sized block of balsa wood with the familiar Graffiti area on the bottom and a sample PIM screen printed on a sheet of paper glued on the top portion. Even though the Zoomer had been discontinued, most of Palm still used the devices as their personal PDAs.

Hawkins left his Zoomer at home and started pretending to write appointments on the Touchdown. Making Touchdown a reality became Palm’s number one priority. Work on PalmConnect and Graffiti was halted, and everybody in the company worked on what became the PalmPilot.4

A Little Help from Friends

After eighteen months of development, the newly named Pilot (whose software was written by Ron Marienetti) was ready for manufacturing, but Palm wasn’t. The company didn’t have enough money to manufacture or market the devices. Dubinsky began intense negotiations with several disparate companies like Compaq and Motorola, both of which had a presence in the PDA market (Motorola-branded Newtons and General Magic-powered communicators), or were developing their own products (Compaq’s early HPCs running Windows CE).

Neither company was interested in maintaining Palm as an independently-run division, so the talks fell through. An unlikely suitor emerged in USRobotics, a company known for cheap modems and LAN cards for PCs. Palm was desperate and agreed to become a fully-owned USRobotics subsidiary.5

The Pilot was revealed to the press on January 29, 1996, and it shipped that March. To cut costs, Palm contracted manufacturing out to a third party and had limited retail distribution. A model with 128 KB of RAM sold for $299, and a 512 KB version sold for $369.

The Pilot was an unqualified hit. It received positive reviews from Macworld, InfoWorld and PC Magazine.6 More important than reviews were sales. Palm sold ten thousand Pilots for the first couple months. The success of the Pilot and later models helped make USRobotics an attractive buyout target for 3Com, but it did not guarantee the independence of Palm’s executives and engineers.

Palm, and its new parent (USRobotics had been acquired by 3Com) enjoyed huge growth. In two years, the company sold 2 million Palm devices, expanded the product line, and had signed up independent licensees including Kyocera and Sony to market their own Palm-powered PDAs.

3Com took a more active role in the running of Palm than US Robotics or its venture capital funders. 3Com was first and foremost a networking company, so Eric Benhamou, the CEO of 3Com, was keen to get Palm to release a wireless Pilot. Hawkins’ opposition to the wireless Pilot project (he feared that the technology was not ready to provide a positive user experience, especially with the slow and expensive wireless data networks) was overruled, since the device would bolster 3Com’s position.

Benhamou exercised his control over more than just product development. He began to installing 3Com executives over the objections of Dubinsky, who had been the CEO of an independent Palm and who only agreed to the USRobotics deal after she was promised that Palm would remain independent (for the most part).

The slights became unbearable during a meeting between Dubinsky and Benhamou when Benhamou reneged on an earlier promise to spin off Palm on July 1, 1998 as an independent company in which 3Com would still own stock. At the conclusion of the meeting, Dubinsky told him that she and Hawkins were leaving the company (Hawkins was surprised and a little upset by her arrogance but agreed to leave).7

The Birth of Handspring

On Monday, July 8, 1998, after the July 4 holiday weekend, Dubinsky emailed the entire Palm staff and told them about her and Hawkins’ resignation and that they would found a new company that would (hopefully) license the Palm OS. With that, two of the founders of Palm packed up their things and left the corporate campus. A few weeks later, Ed Colligan left Palm to join Dubinsky and Hawkins to run their startup’s marketing.8

Hawkins and Dubinsky named their new company Handspring and recruited Palm’s old VC firm Kleiner Perkins to fund the venture (Dubinsky would not go through the headache of securing investments from multiple partners). The same day that the Handspring name and investments were announced, Handspring also signed a licensing agreement with 3Com for the Pilot’s Palm OS operating system that did not prevent Handspring from competing directly with Palm.

In their first press release, Dubinsky stated that Handspring would “create another success on the scale of the PalmPilot.” Thus there was never any doubt that Handspring was in direct competition with Palm.

The Handspring Visor Family

The Palm VII

Hawkins, as the Chief Product Officer, began to brainstorm on possible products. His real interest was wireless, even after the tepid response to the Palm VII (only 200,000 of the units were sold). Unfortunately, that would take time and a huge staff. So instead of releasing a dedicated communicator, Hawkins decided to create an ordinary Palm OS handheld with an expansion slot that could accommodate a cell phone and modem later. That way Handspring would have the opportunity to “gain brand, gain scale, build the infrastructure.”9

Handspring had not officially announced its product plans to the press, only that it was using the Palm OS. Rumors swirled, and Handspring was able to prevent any leaks that might have tipped off its competitors to its expansion or phone ideas. Ironically, many in the press assumed that Handspring would release educational products, a rumor that the company nurtured by assigning toy code names to all of its projects.10

Marianetti, creator of the Graffiti concept, had written most of the software on the original Pilot and had joined Handspring as a senior engineer. He had built in the capacity to add brand new memory chips to the Pilot, but the hardware engineers hadn’t the time to add the physical slot. As a result, Hawkins’ expansion slot essentially already existed in the Palm OS, it would only require tweaking to extend it to a cell phone (or any other accessory). Adding code to the Palm OS to automatically load software from a Springboard module’s built-in memory made it possible to start using Springboard modules immediately without installing drivers.11

How Palm Licensed Its OS

To accommodate the flood of new licensees (such as Sony and Kyocera), Palm had been reorganized into two new divisions. One worked on the Palm OS and with licensees to help them adapt the software to their hardware. The other division, which worked with the Palm OS division merely as another licensee – to insure that licensees’ designs couldn’t be copied by Palm-developed Palm-branded hardware. As a result, Handspring could add the new feature and avoid competing with a similar product from Palm.12

The new product was named Visor by Hawkins’ 10-year-old daughter, short for advisor.13 It was always understood that the Visor would only be a stepping stone to the communicator device, so no other new hardware features were added, except for a small microphone on the bottom of the unit that went unexplained in reviewer’s guides and unsupported in the Palm OS (reviewers were only told it would be enabled by future Springboard modules). Handspring was able to leverage existing Palm designs, only adding expansion card (named Springboard) support and new PIM software from Pimlico Software.14

The Visor’s release date was set for January 2000, scheduled to avoid the Christmas rush, meaning that the engineers would have about a year (less time than the original PalmPilot took to develop and release). Just as Palm had limited the Pilot’s retail release, Handspring would limit Visor’s retail release. The device would only be available directly from Handspring until it was able to ramp up manufacturing – and fix any glitches – and recruit Springboard developers. Then it would be broadly distributed to retailers across the nation.

Before Visor was unveiled to the press, Handspring briefly (according to rumors) became a buyout target for Apple. On July 19, 1999, Apple representatives supposedly started talks to acquire Handspring and make the company an independent division of Apple. This was highly unusual, since Handspring had not even announced the Visor; most of the press thought that Handspring was working on education devices using the Palm OS.

Apple was rebuffed (subscription required), perhaps because Hawkins wouldn’t have been able to design a phone at Apple without interference from marketing and also from Steve Jobs, but the leaks about the talks only helped bolster Handspring’s status in the industry.

On September 13, 1999, the Visor was announced to the world. Unfortunately, 3Com had elected to announce its plans to spin off Palm and to have an IPO a day before Handspring’s announcement. As a result, Handspring’s story was buried in the news that Palm would be independent again.

Dubinsky suspected that Benhamou had scheduled the announcement to blunt any impact of the Handspring announcement, especially since 3Com had knowledge of the Visor’s unveiling date months in advance. Despite competition from Palm, the Visor received a lot of PR, landing on the front page of The New York Times’ technology section three days after the announcement.

Visor was regarded as an incremental improvement to existing Palm devices already on the market, and most coverage was positive (especially in reference to the new Springboard slot). The two low-end versions, Visor Solo ($149) and Visor Deluxe ($179) were cheaper than Palm’s low-end model, the Palm IIIe, and were essentially identical except for enhanced PIM software and the Springboard slot (though the Solo lacked a HotSync cradle). The more expensive Visor Deluxe had 8 MB of RAM.

Handspring distributed demo units to the press in the weeks following the official unveiling, and the reaction was almost universally positive.15, 16 It was quite a bit faster than the Palm IIIxe, the top of the line Palm, because of software hacks (courtesy of Marianetti), had superior PIM software because of its license with Pimlico, and came with a USB cradle (as opposed to the RS-232 serial cradle from Palm). Reviewers were also impressed with the included Tiger Woods PGA golf game, a demonstration of the Springboard feature.

It appeared that everything would be ready for the consumer launch in January.

Web Disaster

Dubinsky had been unable to find a CIO to coordinate the development of the website, so Handspring found a contractor to create and manage a new website that would be as revolutionary as the Pilot had been. It would not only gather orders, but it would automatically manage distribution.

The Handspring website.

Unfortunately, the new website was a kludge. It was open for business on September 14 (for preorders), and it ran until October 20, by which time Handspring’s customer service representatives were inundated with complaints. Customers were complaining about being charged for multiple Visors, multiple cradles, no Visors at all, and sales tax when none was owed. When units started shipping, the problems proved to be bigger than first expected. Several customers received dozens of Visors.17

The website was a PR disaster. Customers were irate, and the press got wind of the problem. Ultimately, a flustered Handspring began taking orders by hand on pen and paper and let customers keep the extra Visors and accessories that they had received. The company probably lost hundreds of customers because of unfulfilled orders and gave many of the people who did receive their Visors a sour taste in their mouth. The website was back up by November 14, but it was too late to capitalize on the September launch.

Off to a Running Start

The Visor survived despite the website problems. A few months after the Visor was released to consumers, Handspring grabbed 28% of the handheld market. Even the Pilot was unable to achieve this feat, largely because of conservative manufacturing estimates (a result of Palm being strapped for cash).

True to Dubinsky’s word, Handspring would not need any new rounds of VC funding. Handspring’s IPO was scheduled for June 16, 2000, six months after Handspring’s first product had been released and proven itself. At a time when companies like Red Hat (or even Palm, which would go public in March of 2000) could have their market capitalization (share price times number of shares) increase by hundreds of percent on the day of the IPO, Handspring’s IPO could hardly be viewed as exceptional. By the time it closed, Handspring share price had increased 30%, a healthy gain – much better than Palm’s initial surge to $165 and subsequent slide to $28.18

Though Handspring was not profitable yet (it lost $40.7 million in the fiscal year ending April 1, 2001 on sales of $370.9 million) and it would remain so until 2001, it was now flush with cash to invest in Hawkins’ phone concepts.19 The company was effectively split in two. One group would work on phone products with Hawkins while the other would release incremental updates to the Visor line (including color and smaller form factors).

Most of the upgrades to the Visor were minor bumps in processor speed, but there were two notable new models released: the Visor Prism (left), which had a color display, and the Visor Edge, which was 11 mm thick and had a new Springboard standard.

Neither model was the smash the original Visor was, but they provided a reliable trickle of cash for the more important projects.

Merging PDAs and Phones

Hawkins accomplished his goal of getting a respected (and lucrative), handheld on the market that would be able to finance the development of wireless accessories.

This was not a new concept for PDAs or even Palm OS-powered PDAs. The Qualcomm pdQ was the first Palm PDA with an integrated telephone. The pdQ received a cool reception from the technology press. Bruce Brown (subscription required) of PC Magazine summed up the general opinion of the device when he suggested that customers “leave it on the store shelves.”

The phone was too big to be a constant companion (which had been a goal for the original Pilot), and its software was not well integrated. Qualcomm released the device on September 21, 1998. Unsurprisingly, the pdQ failed to catch on. The pdQ’s failure made a big impact on the Handspring team developing its first communicator, which would actually be a Springboard module.

To be successful, Visor’s phones (Springboard and standalone) would have to be deeply integrated with the Palm OS and PIM software. Perhaps more important, the device would have to be easier to use than a non-wireless Palm and a conventional cell phone. Hawkins fell back on the tradition of making a balsa wood model of new products with a phone and started carrying it around as his main PDA and phone.

Just like with the Pilot, he would take out the device at the end of meetings to schedule appointments, but he also started pretending to take calls so he could get a feel for the form factor. The internals of both the standalone phone and the Springboard module were contracted out to save on design costs (Handspring was still losing money, though it did not suffer from a plunge in stock price like Palm) to a company called Option International in Belgium.20 The software, where Hawkins could have the greatest impact on ease of use, was done in house at Handspring.

The first product of the phone group was the VisorPhone, the Springboard cell phone module. It was released in June 2000 for $299.21

Flouting a tradition in the cell phone market, Handspring sold directly to consumers and gave them a choice of which wireless provider they wanted to use with the VisorPhone. That decision cost VisorPhone customers the rebates and discounts that wireless providers usually provided to customers in exchange for service contracts.22

VisorPhone’s software was well regarded by the press, but its form factor was not.23, 24 When the VisorPhone was inserted into the Springboard slot, it instantly integrated with the address book and automatically installed phone, SMS, and web browsing software. The result was a seamless installation process and software that applied the strengths of the Palm OS and its PIM software (ease of use and the Zen of Palm – PDF) to a cell phone.

The VisorPhone was more than a phone with an updated address book. There were lots of Hawkins-like additions. The four app buttons on the Visor could be used to search for contacts like a T9 keypad. Users could dial a number from any application on the Visor by tapping the phone button (Handspring had created new icons for the hardware buttons on the bottom and had included a simple handset for the address book instead of a Rolodex, a nod to the VisorPhone). Unlike many other cellphones of the time, the VisorPhone also automatically looked up contacts during calls so users could see a name instead of just a number.25

Unfortunately, the VisorPhone added a huge bulge to the back of the already hefty (for a phone) Visor. On top of that, the Visor was a little too wide to hold in the palm of the hand or in the crook of the shoulder for long calls. Reviewers were also unsatisfied with the Achilles’ heel of the Springboard design: There was only one slot per machine.

Software developers were already marketing games, encyclopedias, and other productivity apps for the Springboard. If a VisorPhone user wanted to use another Springboard module, then no cell phone calls could be made or received until the VisorPhone was replaced in the Springboard slot.26

The VisorPhone was supposed to finance further development of the dedicated phone concept. Unfortunately, sales were well below Handspring’s estimates. In a later interview, Dubinsky said that the VisorPhone was a wake-up call for Handspring. “We tried to understand what people liked and didn’t like about the product.”

Luckily, the failure of the VisorPhone did not augur poorly for the upcoming dedicated phone. Dubinsky and many of the other executives at Palm believed that the VisorPhone’s failure was due to the form factor, not the software or the concept. Ultimately, Visor cut the price of the VisorPhone from $299 to $49 to entice consumers to buy the device, getting rid of unsold inventory.

Treo, Handspring’s Smartphone

Using the same internals and the software from the VisorPhone, Hawkins’ team of designers was able to develop the phone quickly. Speed was a necessity, since Handspring was losing money and didn’t have prospects for becoming profitable again any time soon.

According to Hawkins, the company’s executives agreed during a Fall 2001 meeting that Handspring only had enough money to do one or two big product launches before running out of cash. Hawkins told the gathered executives, “If we’re going to risk everything, let’s risk it on the future.” The Visor, Visor Prism, and Visor Edge were relegated to maintenance releases – and the newly christened Treo became Handspring’s top priority.

An early distinction of the Pilot (and all other Palm PDAs since) was the Graffiti writing area. Earlier handhelds from Microsoft and its partners used clamshell-style cases and chiclet keyboards, and Palm had considered doing the same. During focus groups, however, it was found that consumers found Graffiti more approachable.

NEC MobilePro 700 handheld PC

Unlike the clamshell designs from Microsoft partners known as Handheld PCs, which resembled miniature laptops and ran Windows CE, a Pilot with Graffiti could be operated with one hand in a pinch and was much smaller. (In 2000, Microsoft stopped developing for Handheld PCs in favor of the even smaller Pocket PCs and Windows Mobile.)

With the release of the RIM BlackBerry, it was clear that thumbboards could be just as easy to use as Graffiti – and often faster. Thus, the thumbboard was included with the Treo, and the concept was so popular that Handspring eventually offered a PDA without wireless but with a thumbboard, the Treo 90.27

The Treo was ready to be unveiled to the press on October 15, 2001, and it would ship in January 2002. Unlike the VisorPhone, the Treo 180 (and the Graffiti-based, keyboard-less 180g) received glowing reviews and press write-ups.

Because of the limited success of the VisorPhone, Handspring was slow to recruit wireless providers to sell the Treo with service plans and stuck with its retail distributors. Nonetheless, the Treo helped Handspring get enough money in the bank for two major updates to the Treo line, the 270, which added color, and the Treo 300, which added support for the Sprint CDMA network.

Handspring had a hit on its hands, not just in the eyes of reviewers (like the Visor Edge and the Springboard expansion system), but also in terms of sales. The Treo 180 was named “best mobile device” of 2002 by the editorial board of PC Magazine, beating out other notable new releases like the T-Mobile Pocket PC and the first generation iPod.28

Competitors took note of Handspring’s success with phones. RIM sued Handspring for violating its patents because of the Treo’s use of a keyboard in a PDA with wireless functionality and later licensed the offending IP to Handspring.

Not content to earn a royalty on every Treo sold, RIM became a direct competitor with the BlackBerry 5810, which combined RIM’s push-email system with a severely limited phone that got lukewarm reviews at best. The 5810 didn’t even act as a handset, the user had to use a hands-free kit to receive and make calls. Ironically, Palm would embrace this same limitation with the Tungsten W, which also lacked a handset.

Hawkins had succeeded in creating a Palm OS smartphone in a convenient form factor and with highly intuitive software that embraced the Zen of Palm, but the original models were decidedly low tech. They used lower resolution screens (160 x 160) than their Pocket PC brethren and used the increasingly dated Palm OS 4 while the rest of the Palm manufacturers, including palmOne, began to move to Palm OS 5.

Palm OS 5

Palm OS 5 was meant as a stopgap release for the upcoming Palm OS 6, which was based on BeOS (Jean Louis Gassée was a PalmSource board-member and orchestrated the sale). The only notable feature in Palm OS 5 was its support for ARM processors. This would make it possible for Palm OS devices to finally compete against the PocketPC’s multimedia features (Windows Media Player had been bundled with the software since its introduction).

Ultimately, Palm OS 6 never shipped, and Palm OS 5 would be on the market for over five years. The first Palm OS 5 device, the Palm Tungsten T, was released in October 2002 to very positive reviews. In addition the new OS, the Tungsten T also included Bluetooth and a collapsible Graffiti area.

Reunited, and It Feels So Good

Work on a new Treo based on the ARM processor began, but Handspring was running into the same problems that Palm had experienced with the Pilot and that Handspring had experienced with the Visor: There simply wasn’t enough money to pay for development of a new device (especially one that was such a radical departure from the first generation Treo) and the large marketing campaign that would be required to get the device into the hands of consumers and service providers.

To the knowledge of few associated with either company, Handspring was in the midst of talks with Palm. It’s not clear when these talks began, but the two companies announced the merger in June 2003. Palm would pay $25 million for Handspring and give Handspring investors .09 shares of Palm stock for every Handspring share and would bring Dubinsky, Hawkins, and Colligan back into the fold (with Colligan as CEO of the new company).29 The deal wouldn’t be completed until October 2003, so Palm also gave Handspring a $10 million line of credit to release and market the new Treo 600, the last Handspring-branded device released.30

This article is adapted from Tom Hormby’s “History of Handspring and the Treo (Part III)”, which was originally published on Silicon User on Oct. 23, 2007. It has been updated and expanded. It is published here with his permission.